How to Finish Paying Off a Payday Loan Quickly
The very last thing you want in life is to be stuck paying off a payday loan. This is the type of loan that should be paid off as soon as possible. Online payday loans are unsecured and easy to get approval for, but with such great convenience come high interest rates which can be as much as 900 percent annually.
Compare this to credit cards, which rarely exceed above 30 percent on the annual interest rate. Clearly, the longer you wait to finish paying back a payday loan, the deeper you sink into debt.
You cannot pay off payday loan debt as you would a mortgage or a car loan. For starters, the laws governing payday loans are entirely different from the laws governing secured loans, and also payback options are usually up to the lender's discretion. Lenders usually require borrowers to sign a post-dated check to withdraw the balance plus interest from your account when their next paycheck is due. However, borrowers can get extensions, which will cause their debt to grow like algae in a swamp. With high APRs, one can become indebted in the hundreds. So, finish paying the payday loans as soon as possible by heeding the following tips:
1) Budget to Make the One Time Payment
The ideal way to pay back your loan is to allow the lender to withdraw the entire amount due from your bank account on your next payday. If the amount due is significant, which it will most likely be, make sure that you have adequate funds in your bank account as the deadline approaches. You might need to make a budget and be as frugal as possible to do so. Don't make any large or inessential purchases before the creditor has withdrawn funds. If you are short on funds no matter what you do, ask money from a friend or a family member and deposit it in your account.
Making the single payment is the most affordable option for repaying.
2) Don't Extend the Loan
Even if your loan contract allows grace periods or extensions for your loan, don't ask for one. Your debt will snowball each day that you wait to pay it back. Remember those high interest rates? They are not going to come down. Therefore, don't make excuses and extend the loan. Pay it back without waiting. The sooner, the better.
Don't let the loan automatically renew either. Check the contract and check with your bank and stop all transfers once the first payment is made.
3) Try an Extended Payment Plan
If you absolutely cannot pay back the loan on the given date, instead of extending the loan, consider entering into an extended payment plan.
This option comes without a penalty most of the time. Extended payment plans allow you to spread your payment into several weeks without additional interest incurring or late fees being charged. However, only some lenders offer this option. If your lender is a member of the Community Financial Services Association of America (CFSA), they must offer you this option. EPPs are also subject to state laws, so they work differently depending on where you live. For example, some states may offer state-mandated extended payments options in place of the ones like the CFSA's.
Do your research and find out what kind of EPPs you might qualify for.
4) Roll It Over
In some cases, lenders allow you to roll over payday loans, usually for about four times. Certain states require lenders to offer the borrower the option to rollover a payday loan. Check with your state regarding whether this option is available to you. Rolling over the loan can allow you some time to gather funds and get personal finances in order to repay everything back. However, additional fees can apply with this option.
5) Borrow More
This usually is a course of action of the last resort. Borrowing money to pay off borrowed money is a slippery slope.
You could end up in a vicious cycle of debt if you don't keep your borrowing habits in check. If you have no other option, you can opt for another type of loan to pay off a payday loan. Never, ever take out a payday loan or a similar high-interest loan to pay off another payday loan. Instead, consider asking money from people you trust, or get a low-interest loan from a credit union or a community bank. In any case, make sure all other options are out of reach for you before you borrow even more money.
If you are still at a loss regarding paying back your payday loan, you can always seek advice from a local credit counseling center. They can offer you additional options, negotiate a new deal with the lender or provide legal support. All in all, you must do everything you can to fully repay a payday loan without hesitating.
Learn more from this WikiHow article.